Cord Cutter. It’s a phrase that sends chills up the spine of any broadcaster. And although broadcasters may deny their own animosity towards the term, they can’t ignore its impact on their industry.
But I’m not here to talk about cord cutting. In fact, with what the data shows us, there are in fact very few people actually cutting any cords (just 8% of households in Q3 2013, based on data from Centris). Sure the big cable operators are losing subscribers, but smaller competitors (like AT&T UVerse and Verizon Fios) are picking up their fair share. In fact, according to a Bloomberg article, those smaller competitors are signing-up more than the others are losing, suggesting that total subscribers might actually be growing, not shrinking.
No, the title of this blog post is about something quite different than cord cutting—it’s about a fundamental change in the way that we consume traditional TV broadcast, otherwise known as linear content. Not because the Internet threatens traditional terrestrial broadcast but because changing consumer behaviors are forcing broadcasters and content owners to evolve the way they deliver their products in order to meet a new set of consumer expectations.
What is Self-Service TV?
Self-service TV describes a future scenario in which consumers can watch anything they want at any time they want to, versus how it is now—consumers must watch most content according to an arbitrary schedule (think TV Guide). In the self-service future, content owners will no longer be publishing according to weekly schedules, but instead providing access to content as soon as it’s available.
What’s Driving Self-Service TV?
This concept of “anytime, anywhere” access to video content isn’t new. It’s been around ever since the VCR showed up on the consumer technology scene. In fact, there are a host of trends that have been driving us towards the eventuality of self-service TV for quite some time:
- Show recording (VCR to DVR)
- Multi-device consumption
- Consumer TV viewing behavior
- Advertising parity
- Digital video
- Broadcast replication
- Cutting the cord
- Binge watching
- Cable OTT offerings
- Direct -to -consumer content
Let’s take a look at each of them.
1. Show Recording
Beginning with the VCR, consumers have been interested in taping shows and watching them at their convenience. This behavior carried over with the advent of PVR/DVR devices (like TiVo). The result is a consumer expectation of watching video content when it is convenient to them, not according to an arbitrary or pre-determined schedule of availability.
2. Multi-device Consumption
Consumers are increasingly watching video from multiple devices. According to Google’s 2012 “Multi-Screen World” study (conducted with Ipsos and Sterling Brand), consumers are using multiple devices during the day to consume content, especially video. In fact, according to that same study, 90% of our media consumption is via one of four screens—TV, PC, smartphone, and tablet; and when we own all four devices, we use them all to consume content each day. What this means is that consumers are no longer sitting in front of the TV according to a schedule and, in some cases, are watching content that is originating on the other side of the globe.
3. Consumer TV Viewing Behavior
Data from Nielsen is showing us one thing—that consumers are watching less linear television. Why? Because some of the hottest shows (like AMC’s The Walking Dead, Netflix’s House of Cards, and others) are available via other outlets. For example, I subscribe to The Walking Dead through iTunes. Once the show has aired, it becomes available to me within hours. I don’t have to wait until AMC airs it on TV again (especially if I miss the first airing). I can watch it when I want to. This kind of behavior may be responsible for the declining time that people spend watching linear TV:
- 2-11. This age group watched 22% less linear television per week;
- 12-17. This age group watched 33% less linear television per week;
- 18-24. This age group watched 25% less linear television per week;
- 25-34. This age group watched 13% less linear television per week.
Airplay enables consumers to watch any content on the television screen—even if that content originates from their other devices. For example, it’s quite feasible that a user could “log in” to a subscription-only live event like an NFL game and push the stream to their television. In this scenario, the phone becomes the primary content consumption device (rather than the TV). The television itself has become just another screen.
5. Broadcast Replication
Perhaps one of the least known technologies, broadcast replication enables consumers to view their linear broadcast content on devices outside of the home. In contrast to Airplay, where content is streamed from a connected device and the TV becomes the “second screen,” broadcast replication streams TV content through mobile devices, even remotely. The most notable provider of this service is SlingBox (acquired by DISH Network), but similar technology has been built into the latest versions of the TiVo line of PVRs (Roamio) and even cable operators are beginning to offer this kind of functionality. Broadcast replication further illustrates and supports the consumer desire to “watch content when they want to” even if, in this specific instance, the content is according to a schedule.
6. Advertising Parity
Recent advances in advertising delivery from players like BlackArrow enable the delivery of typical “broadcast advertising” into on-demand, Internet-based streaming video. For example, rather than encoding a video asset with its advertising for on-demand playback, the content publisher encodes “placeholders” within the video that can be filled dynamically with ads that are representative of current advertising contracts. This ensures that appropriate advertisements are dynamically displayed at the time of playback, taking into consideration where the user is watching the video (i.e., geographic location).
7. Digital Video
Content owners are increasingly moving to filmless video production, enabling them to deliver their video through over the Internet to broadcasters (i.e., instead of satellite backhaul) and, when the opportunity permits, directly to end-consumers. Paramount Pictures recently announced that they would film using only digital technologies (along with Netflix, Amazon, and others). This means that, over time, a growing portion of the video available to consumers will already be in a format suitable for delivery over HTTP (after transcoding the master movie file to whatever formats might be supported, such as HD and 4K).
8. Binge Watching
DVD-box sets and “season passes” for linear broadcast content have become popular over the past few years, enabling consumers to watch older content when they want to, and where they want to (i.e., an entire season in one sitting, hence the term “binge watching”). But most recently, Netflix has changed the way new content is distributed. In 2013, Netflix released the entire first season of their original programming House of Cards all at once,—pointing to consumer demand to watch what they want, when they want, and where they want. Case in point: between Season 1 and Season 2 of House of Cards, there was a 4X increase in the number of “binge viewers” during the first weekend the season was released!
9. Direct-to-Consumer Content
A number of original content owners (i.e., HBO, AMC, Starz) are beginning to offer their content directly to consumers. In some cases, the content is only available through a cable or satellite operator subscription but when a consumer does have access, they can usually consume this kind of content from a variety of channels including mobile devices, mobile applications, SmartTV applications, game consoles, and set-top boxes (like Apple TV and Roku). In conjunction with “binge watching,” this provides another way for consumers to watch what they want, when they want.
10. Cable OTT Offerings
Over the past five or so years, more cable operators have been offering content portals for their subscribers. These portals provide subscribers with both the on-demand versions of linear content that has already been broadcast, as well as, in some cases like Cox communication and Time Warner, the actual linear feed. The launch and marketing of these portals and services (i.e., Comcast Xfinity) seems to mark the cable and satellite operators’ understanding of the changing consumer behavior towards anytime, anywhere viewing.
11. Cutting the Cord
Cutting the cord refers to consumers terminating their subscriptions with broadcast content providers like cable and satellite operators. This requires consumers to source their content directly from content owners (i.e., ABC, CBS, NBC, AMC, etc.) and aggregators (i.e., Hulu, Netflix, iTunes, etc.) via the Internet. This is a growing trend among the “millennial” generation as they move out of their parents’ homes and are required to support themselves financially—as digital natives, they may not see the value in a $50/month cable fee when content is freely and directly available through other channels.
Connecting the Dots
So how do all those trends portend a future of self-service TV? Here is one way that all the dots connect.
First, consumer behavior has been gradually changing over the past decade to a “watch what you want, where you want, when you want” model and technology has risen to meet it as well. New trends like broadcast replication and airplay enable consumer self-service like never before and transform the nature of TV.
Second, some content owners responded to this behavior early, with tactics such as selling full-season DVD sets and “season passes” (i.e., via iTunes) to satisfy so-called binge watchers.
Third, as more content has become digital, consumers are looking for it directly from content owners (rather than through their cable/satellite provider who they see as a “middle man” in many cases). This has resulted in two things—content owners are offering direct-to-consumer content and consumers are terminating subscriptions to cable/satellite providers.
Fourth, new content providers like Netflix and Amazon are changing the status quo for how content is made available by electing to release partial or full seasons of original programming at one time.
Finally, cable and satellite providers are “fighting back” by building on-demand portals that users can access to watch content on their own schedule and from whatever device they choose.
What the Future Might Look Like
In a future of self-service TV, new content will be posted to video catalogs based upon release dates specified by content owners. Although the content may be “broadcast” at a specific time, consumers will no longer feel obligated to watch it at that time, as they will be able to “tune-in” at anytime during or after the broadcast to watch the show from beginning to end (with plenty of pauses, rewinds, and fast-forwards in between). The traditional TV Guide will come to resemble an iTunes library: a list of published content accessible on demand through a myriad of channels including web, broadcast, apps, and more. Content providers will provide consumers who “subscribe” to their programs with immediate notification upon availability of a new episode, as well as access to complimentary content via second-screens (such as the director interviews and extra scenes often found as “bonus content” during the DVD era).
Of course, self-service TV doesn’t end the era of linear TV. This is a generational shift. Linear TV will continue to exist, side-by-side with self-service TV, so that an older generation can still access content in the way in which they are familiar and comfortable.
Is Advertising the Final Barrier?
Perhaps the biggest concern for content owners and broadcasters is advertising. Prior to BlackArrow’s technology, VOD advertising was very static. The ads were “baked” into the video asset at the time of encoding. That meant that if a user watched a video a year after it was made, they saw the same ad that was originally embedded—creating ad impressions for which the content owner and the cable operator were not making any money. With BlackArrow’s introduction of their dynamic advertising insertion technologies, content owners and cable operators are able to insert ads dynamically. This enables them to continually update ads (to reflect current advertising contracts) over the lifetime of the VOD asset. Given that advertising is a primary source from which broadcasters generate their revenue, it is critical that this technology exists and operates correctly in order for syndicated programming to move to a profitable self-service model.
Are Cable Companies Going Away?
That’s up in the air. In one scenario, the cable and satellite operators transition linear broadcast subscriptions to IPTV subscriptions. In this way, they are providing an immense amount of value by enabling consumers to watch all of the content they want through a single portal. But in another scenario, the cable and satellite operators are displaced by startups that can offer a better IPTV experience. The issue is exacerbated as content owners continue to offer their content directly to consumers that don’t require a cable or satellite subscription to watch. At that point, there is nothing holding the subscriber to the cable operator…except a potentially great IPTV experience.
What Should Content Owners Do?
Content owners need to be prepared. Although some are leading the charge (i.e., Netflix) and others seem to have a glimmer of the real future at stake (i.e., HBO, Starz, AMC, etc.), very few that currently publish linear content are really prepared to offer their content to consumers in a self-service model. Doing so not only requires a robust infrastructure capable of delivering content to any device, anywhere in the world (at scale), but also creating a digital experience that spans devices and provides consumers everywhere easy access to that content. Content owners will also need to build second-screen applications that build and sustain engagement between content publishing events such as a television program’s next “season.”
Still, the writing is on the wall—content owners are going digital, content is being delivered more and more digitally (in Cisco’s last VNI report, they predict that by 2017 70% of Internet traffic will be video), and consumers are accessing that content on all of their devices. It’s only a matter of time until there is enough pressure on content owners to start releasing content when they have it completed, and not according to an arbitrary schedule.